Mullen Group Ltd. — Interim / Quarterly Report 2020

Apr 22, 2020

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MARCH 31, 2020

INTERIM FINANCIAL REPORT

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(unaudited) (thousands) March 31 Note 2020	December 31 2019
Assets Current assets: Cash and cash equivalents $ 84,670 $ Trade and other receivables 5 212,612 Inventory 31,531 Prepaid expenses 15,328 Current tax receivable 9,104	79,023 211,209 33,015 15,461 10,623
353,245 Non-current assets: Property, plant and equipment 951,940 Right-of-use assets 36,281 Goodwill 8 268,707 Intangible assets 43,426 Investments 37,198 Deferred tax assets 8,320 Derivative financial instruments 6 66,092 Other assets 7 2,723	349,331 954,604 36,799 268,707 48,456 38,491 8,070 41,375 3,459
1,414,687	1,399,961
Total Assets $ 1,767,932 $	1,749,292
Liabilities and Equity Current liabilities: Accounts payable and accrued liabilities $ 98,442 $ Dividends payable 9 5,191 Current tax payable 109 Lease liabilities – currentportion 10,755	90,028 5,241 44 10,711
114,497 Non-current liabilities: Convertible debentures – debt component 109,350 Long-term debt 11 494,895 Lease liabilities 29,352 Asset retirement obligations 1,653 Deferred tax liabilities 116,176	106,024 108,764 467,392 29,975 1,647 117,569
751,426 Equity: Share capital 12 937,215 Convertible debentures – equity component 9,116 Contributed surplus 21,655 Deficit (65,977)	725,347 946,910 9,116 16,860 (54,965)
902,009	917,921
Subsequent event 20
Total Liabilities and Equity $ 1,767,932 $	1,749,292

The notes which begin on page 49 are an integral part of these condensed interim consolidated financial statements.

Approved by the Board of Directors on April 22, 2020, after review by the Audit Committee.

"Signed: Murray K. Mullen" "Signed: Philip J. Scherman"

Murray K. Mullen, Director

Philip J. Scherman, Director

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2020 FIRST QUARTER INTERIM REPORT

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CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(unaudited) (thousands, except per share amounts) Note	Three month periods ended March 31	Three month periods ended March 31
	2020	2019
Revenue 15 Direct operating expenses Sellingand administrative expenses	$ 318,234 232,414 40,610	$ 319,562 233,350 42,242
Operating income before depreciation and amortization Depreciation of property, plant and equipment Depreciation of right-of-use assets Amortization of intangible assets Finance costs Net foreign exchange loss (gain) 6 Other(income)expense 16	45,210 17,536 2,892 5,030 7,209 2,740 1,316	43,970 17,375 2,790 4,426 4,907 (1,121) (41)
Income before income taxes Income tax expense 10	8,487 3,825	15,634 4,059
Net income and total comprehensive income	$ 4,662	$ 11,575
Earnings per share: 13 Basic Diluted	$ 0.04 $ 0.04	$ 0.11 $ 0.11
Weighted average number of Common Shares outstanding: 13 Basic Diluted	104,671 104,671	104,825 104,825

The notes which begin on page 49 are an integral part of these condensed interim consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

					Convertible
					debentures
(unaudited)			Share		– equity		Contributed
(**thousands) **			capital		component		surplus		Deficit		Total
Balance at January 1, 2020		$	946,910	$	9,116	$	16,860	$	(54,965)	$	917,921
Total comprehensive income for the period			—		—		—		4,662		4,662
Common Shares repurchased	12		(9,695)		—		4,447		—		(5,248)
Stock-based compensation expense			—		—		348		—		348
Dividends declared to common shareholders	9		—		—		—		(15,674)		(15,674)
Balance at March 31, 2020		$	937,215	$	9,116	$	21,655	$	(65,977)	$	902,009

					Convertible
					debentures
(unaudited)			Share		– equity		Contributed
(**thousands) **			capital		component		surplus		Deficit		Total
Balance at January 1, 2019		$	946,910	$	—	$	15,477	$	(64,311)	$	898,076
Total comprehensive income for the period			—		—		—		11,575		11,575
Stock-based compensation expense			—		—		357		—		357
Dividends declared to common shareholders	9		—		—		—		(15,724)		(15,724)
Balance at March 31, 2019		$	946,910	$	—	$	15,834	$	(68,460)	$	894,284

The notes which begin on page 49 are an integral part of these condensed interim consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited) (thousands) Note	Three month periods ended March 31	Three month periods ended March 31
	2020	2019
Cash provided by (used in): Cash flows from operating activities: Net income Adjustments for: Depreciation and amortization Finance costs Stock-based compensation expense Foreign exchange (gain) loss on cross-currency swaps 6 Foreign exchange loss (gain) Change in fair value of investments 16 Loss on sale of property, plant and equipment 16 Earnings from equity investments 16 Accretion on asset retirement obligations 16 Income tax expense 10	$ 4,662 25,458 7,209 348 (24,717) 25,728 1,452 17 (159) 6 3,825	$ 11,575 24,591 4,907 357 5,268 (6,195) (121) 628 (552) 4 4,059
Cash flows from operating activities before non-cash working capital items Changes in non-cash workingcapital items from operatingactivities 17	43,829 270	44,521 (6,097)
Cash generated from operating activities Income taxpaid	44,099 (3,884)	38,424 (14,222)
Net cash from operatingactivities	40,215	24,202
Cash flows from financing activities: Cash dividends paid to common shareholders Repurchase of Common Shares 12 Interest paid Proceeds from bank credit facility Repayment of lease liabilities Changes in non-cash workingcapital items from financingactivities 17	(15,724) (5,248) (343) — (2,846) 1,137	(15,724) — (654) 5,300 (2,883) 701
Net cash used in financingactivities	(23,024)	(13,260)
Cash flows from investing activities: Purchase of property, plant and equipment Proceeds on sale of property, plant and equipment Net investment in finance leases Interest received Other assets Changes in non-cash workingcapital items from investingactivities 17	(15,926) 1,037 278 634 (8) 712	(15,868) 1,372 144 428 41 1,758
Net cash used in investingactivities	(13,273)	(12,125)
Change in cash and cash equivalents Cash and cash equivalents at January 1 Effect of exchange rate fluctuations on cash held	3,918 79,023 1,729	(1,183) 3,916 (194)
Cash and cash equivalents at March 31	$ 84,670	$ 2,539

The notes which begin on page 49 are an integral part of these condensed interim consolidated financial statements.

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2020 FIRST QUARTER INTERIM REPORT

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NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

Three month periods ended March 31, 2020 and 2019 (unaudited)

(Tabular amounts in thousands, except share and per share amounts)

1. Reporting Entity

Mullen Group Ltd. (" Mullen Group " and/or the " Corporation ") was incorporated pursuant to the laws of the Province of Alberta and is a publicly-traded company listed on the Toronto Stock Exchange (" TSX ") under the symbol 'MTL'. The Corporation maintains its registered office in Okotoks, Alberta, Canada. The business of Mullen Group is operated through wholly-owned (either directly or indirectly) subsidiaries and limited partnerships (" Business Units "). The Corporation is recognized as one of the leading suppliers of trucking and logistics services in Canada providing a wide range of service offerings including less-than-truckload, truckload, warehousing, logistics, transload, oversized and specialized hauling transportation. In addition, Mullen Group provides a diverse set of specialized services related to the energy, mining, forestry and construction industries in western Canada, including water management, fluid hauling and environmental reclamation. These unaudited condensed interim consolidated financial statements (" Interim Financial Statements ") include the accounts of the Corporation, its subsidiaries and its limited partnerships.

2. Basis of Presentation

(a) Statement of Compliance

These Interim Financial Statements have been prepared in accordance to and comply with International Financial Reporting Standards (" IFRS "), which include the International Accounting Standards (" IAS ") and the interpretations developed by the International Financial Reporting Interpretations Committee (" IFRIC "), as issued by the International Accounting Standards Board (" IASB "). These Interim Financial Statements comply with IAS 34 Interim Financial Reporting and do not include all of the information required for annual financial statements.

(b) Basis of Measurement

These Interim Financial Statements have been prepared on the historical cost basis except for investments (excluding investments accounted for by the equity method), and derivative financial instruments (" Derivatives "), which are measured at fair value through profit or loss.

(c) Functional and Presentation Currency

These Interim Financial Statements are presented in Canadian dollars, which is the functional currency of the Corporation and each of its Business Units. All financial information presented in Canadian dollars has been rounded to the nearest thousand except for per share amounts.

3. Significant Accounting Policies

The accompanying Interim Financial Statements should be read in conjunction with Note 3 to Mullen Group's audited annual consolidated financial statements for the year ended December 31, 2019, (the " Annual Financial Statements ") as the accounting policies applied by the Corporation in these Interim Financial Statements are the same as those disclosed therein.

4. Determination of Fair Values

The following table compares the fair value of certain financial assets and financial liabilities to its corresponding carrying amount as presented in the condensed consolidated statement of financial position.

Investments (excluding investments accounted for by using the equity method) Level 1 $ 702 Derivative Financial Instruments Level 2 $ 66,092 Private Placement Debt Level 2 $ 494,895 Convertible Debentures – debt component Level 2 $ 109,350	$ 702 $ 66,092 $ 451,408 $ 106,869

5. Trade and Other Receivables

rade and Other Receivables
March 31 2020	December 31 2019
Trade receivables $ 185,824 $ Other receivables 24,736 Net investment in finance leases 1,147 Contract assets 905	182,023 26,907 788 1,491
$ 212,612 $	211,209

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2020 FIRST QUARTER INTERIM REPORT

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NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS Three month periods ended March 31, 2020 and 2019 (unaudited) (Tabular amounts in thousands, except share and per share amounts)

6. Derivative Financial Instruments

On July 25, 2014, Mullen Group entered into two cross-currency swap contracts with a Canadian bank to swap $117.0 million U.S. dollars and $112.0 million U.S. dollars into Canadian dollars (collectively, the " Cross-Currency Swaps ") at foreign exchange rates of $1.1047 and $1.1148 that mature on October 22, 2024 and October 22, 2026, respectively. These Cross-Currency Swaps hedge the principal amount of the Series G and Series H Notes.

For the three month period ended March 31, 2020, Mullen Group has recorded a net foreign exchange loss (gain) of $2.7 million (2019 – $(1.1) million). This was due to the impact of the change over the period in the value of the Canadian dollar relative to the U.S. dollar on the Corporation's U.S. dollar debt and from the change in the fair value of its Cross-Currency Swaps as summarized in the table below:

Net Foreign Exchange Loss (Gain)	Three month periods ended March 31	Three month periods ended March 31
	CDN. $ Equivalent
	2020	2019
Foreign exchange loss (gain) on U.S. $ debt Foreign exchange(gain)loss on Cross-CurrencySwaps	$ 27,457 $ (24,717)	(6,389) 5,268
Net foreign exchange loss (gain)	$ 2,740 $	(1,121)

For the three month period ended March 31, 2020, Mullen Group recorded a foreign exchange loss (gain) on U.S. dollar debt of $27.5 million (2019 - $(6.4) million) as summarized in the table below:

Foreign Exchange Loss (Gain) on U.S. $ Debt ($ thousands, except exchange rate amounts)	Three month periods ended March 31	Three month periods ended March 31	Three month periods ended March 31	Three month periods ended March 31
	2020	CDN. $ Equivalent		2019
	U.S. $ Debt Exchange Rate		U.S. $ Debt	Exchange Rate	CDN. $ Equivalent
Ending – March 31 Beginning– January1	229,000 1.4187 229,000 1.2988	324,883 297,426	229,000 229,000	1.3363 1.3642	306,013
					312,402
Foreign exchange loss (gain) on U.S. $ debt		27,457			(6,389)

For the three month period ended March 31, 2020, Mullen Group recorded a foreign exchange (gain) loss on its Cross-Currency Swaps of $(24.7) million (2019 – $5.3 million). This was due to the change over the period in the fair value of these Cross-Currency Swaps as summarized in the table below:

Foreign Exchange (Gain) Loss on Cross-Currency Swaps		Three month periods ended March 31	Three month periods ended March 31
	2	020 CDN. $ Change in Fair Value **of Swaps **		2019
	U.S. $ Swaps		U.S. $ Swaps	CDN. $ Change in Fair Value **of Swaps **
Cross-Currency Swap maturing October 22, 2024 Cross-CurrencySwapmaturingOctober 22, 2026	117,000 112,000	(12,880) (11,837) (24,717)	117,000 112,000	2,699
				2,569
Foreign exchange (gain) loss on Cross-Currency Swaps				5,268

7. Other Assets

Promissory notes $ 753 $ Net investment in finance leases 1,540 Other 430	767 2,284 408
$ 2,723 $	3,459

8. Goodwill

Goodwill is reviewed for impairment annually at December 31, or more frequently if there are indications that impairment may have occurred. One indication that an asset may be impaired occurs when the carrying amount of the net assets of an entity is more than its market capitalization. The carrying amount of Mullen Group's net assets exceeded its market capitalization as at March 31, 2020. Goodwill impairment is tested at the cash generating unit ( "CGU" ) level and is determined based upon the recoverable amount of each CGU compared to the CGUs respective carrying amount. At March 31, 2020, the Corporation performed an impairment test for goodwill within certain CGUs, including revising revenue projections downwards and increasing the discount rate, and concluded that there was no impairment of goodwill as the recoverable amount for these CGUs was higher than

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2020 FIRST QUARTER INTERIM REPORT

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NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS Three month periods ended March 31, 2020 and 2019 (unaudited) (Tabular amounts in thousands, except share and per share amounts)

their respective carrying amount. Given the unprecedented economic impact due to COVID-19 and low oil prices, Mullen Group will continue to monitor events in the second quarter and the assumptions used for such impairment tests.

9. Dividends Payable

For the three month period ended March 31, 2020, Mullen Group declared monthly dividends of $0.05 per Common Share totalling $0.15 per Common Share (2019 – $0.15 per Common Share). On February 12, 2020, Mullen Group announced its intention to pay annual dividends of $0.60 per Common Share ($0.05 per Common Share on a monthly basis) for 2020. At March 31, 2020, Mullen Group had 103,824,053 Common Shares outstanding and a dividend payable of $5.2 million (December 31, 2019 – $5.2 million), which was paid on April 15, 2020. On March 20, 2020, Mullen Group announced that it temporarily suspended the monthly dividend of $0.05 per Common Share for three months, effective April 1, 2020.

10. Income Taxes

The following table provides a reconciliation of the effective tax rates based on the applicable tax rates in various provincial jurisdictions during the period.

	Three month periods ended March 31	Three month periods ended March 31
	2020	2019
Income before income taxes Combined statutory tax rate Expected income tax Add (deduct): Non-deductible (taxable) portion of net foreign exchange (gain) loss Non-deductible (taxable) portion of the change in fair value of investments Stock-based compensation expense Changes in unrecognized deferred tax asset Other	$ 8,487 $ 26% 2,207 342 182 87 — 1,007	15,634 27% 4,221 (151) (16) 96 (151) 60
Income tax expense	$ 3,825 $	4,059

11. Long-Term Debt and Credit Facility

On October 24, 2018, Mullen Group entered into an agreement with its lender to amend the amount available to be borrowed on its credit facility (the " Bank Credit Facility "). The amount available to be borrowed on the Bank Credit Facility was increased by $50.0 million to $125.0 million. On June 21, 2019, the amount available to be borrowed on the Bank Credit Facility was increased by $25.0 million to $150.0 million. Interest on the Bank Credit Facility is payable monthly and is based on either the bank prime rate plus 0.50 percent or bankers' acceptance rates plus an acceptance fee of 1.50 percent. As at March 31, 2020, no amounts were drawn on this facility. All other terms under the Bank Credit Facility remain the same. This facility does not have any financial covenants, however, Mullen Group cannot be in default of its Private Placement Debt and it must be in compliance with certain reporting and general covenants. Mullen Group is in compliance with all of these reporting and general covenants.

Mullen Group has $3.9 million of letters of credit outstanding, which were issued to guarantee certain performance and payment obligations. These letters of credit reduce the amount available under the Bank Credit Facility.

Mullen Group's long-term debt is mainly comprised of a series of unsecured debt (collectively, the " Private Placement Debt "), the details of which are set forth below:

Series G $ Series H $ Series I $ Series J $ Series K $ Series L $	117,000 U.S. October 22, 2024 3.84% 112,000 U.S. October 22, 2026 3.94% 30,000 CDN. October 22, 2024 3.88% 3,000 CDN. October 22, 2026 4.00% 58,000 CDN. October 22, 2024 3.95% 80,000 CDN. October 22, 2026 4.07%

(1) Interest is payable semi-annually.

Mullen Group's unamortized debt issuance costs of $1.0 million related to its Private Placement Debt have been netted against its carrying value at March 31, 2020 (December 31, 2019 – $1.0 million). Mullen Group has certain financial covenants that must be met under its unsecured Private Placement Debt, which include a total net debt to operating cash flow ratio and a total earnings available for fixed charges to total fixed charges ratio. Mullen Group's total net debt cannot exceed 3.5 times operating cash flow calculated using the trailing twelve months financial results normalized for acquisitions. The term " total net debt " means all debt including the Private Placement Debt, lease liabilities, the Bank Credit Facility and letters of credit less any unrealized gain on Cross-Currency Swaps plus any unrealized loss on Cross-Currency Swaps, as disclosed within Derivatives on the condensed consolidated statement of financial position. The term " operating cash flow " means, for any quarterly period, the trailing twelve month consolidated net income adjusted for all amounts deducted in the computation thereof on account of (i) taxes imposed on or measured by income or excess profits, (ii) depreciation and amortization taken during such period, (iii) total interest charges, including interest on the Debentures and lease

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2020 FIRST QUARTER INTERIM REPORT

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NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS Three month periods ended March 31, 2020 and 2019 (unaudited) (Tabular amounts in thousands, except share and per share amounts)

liabilities; and (iv) non-cash charges. Mullen Group cannot have a fixed charge coverage ratio less than 1.75:1 calculated using the trailing twelve months financial results. Mullen Group is in compliance with all the Private Placement Debt financial covenants.

Mullen Group entered into Cross-Currency Swaps to swap the Series G and Series H Notes into Canadian dollars at foreign exchange rates of $1.1047 and $1.1148 that mature on October 22, 2024 and October 22, 2026, respectively.  For more information, refer to Note 6 .

The following table summarizes the Corporation's total debt:

March 31, 2020	December 31, 2019
Current liabilities: Private Placement Debt $ — $ Lease liabilities – current portion 10,755 Bank Credit Facility —	— 10,711 —
10,755 Non-current liabilities: Private Placement Debt 494,895 Lease liabilities 29,352	10,711 467,392 29,975
524,247	497,367
$ 535,002 $	508,078

The details of total debt, as at the date hereof, are as follows:

	Interest Rate	March 31, 2020 Face Value Carrying Amount	March 31, 2020 Face Value Carrying Amount	March 31, 2020 Face Value Carrying Amount
			Face Value	Carrying Amount
Bank Credit Facility — Lease liabilities 2020-2028 Private Placement Debt 2024-2026	Variable 3.20% 3.84% - 4.07%	$ $	$	$
		— — 43,396 40,107 495,882 494,895	— 43,754 468,425	— 40,686 467,392
		539,278 535,002	512,179	508,078

12. Share Capital

The authorized share capital of Mullen Group consists of an unlimited number of no par value Common Shares and an unlimited number of Preferred Shares, issuable in series.

The number of, and the specific rights, privileges, restrictions and conditions attaching to any series of Preferred Shares shall be determined by the Board of Directors (the " Board ") of Mullen Group prior to the creation and issuance thereof. With respect to the payment of dividends and distribution of assets in the event of liquidation, dissolution or winding-up of Mullen Group, whether voluntarily or involuntarily, the Preferred Shares are entitled to preference over the Common Shares and any other shares ranking junior to the Preferred Shares from time to time and may also be given such other preferences over the Common Shares and any other shares ranking junior to the Preferred Shares as may be determined at the time of creation of such series. As at the date hereof, no series of Preferred Shares had been created.

All of the issued Common Shares of Mullen Group have been paid in full.

	# of Common Shares	# of Common Shares
	2020	2019
Issued Common Shares at January 1 Common Shares repurchased and cancelled	104,824,973 (1,000,920)	104,824,973 —
Issued Common Shares at March 31	103,824,053	104,824,973

On March 4, 2020, Mullen Group announced a normal course issuer bid (" NCIB "), commencing March 9, 2020, to purchase for cancellation up to 7,972,926 Common Shares in the open market on or before March 8, 2021. As at March 31, 2020, Mullen Group had purchased and cancelled 1,000,920 Common Shares for $5.2 million under this NCIB program.

All purchases were made in accordance with the NCIB at prevalent market prices as permitted by the Toronto Stock Exchange, with consideration allocated to share capital up to the average carrying amount of the shares and any excess allocated to contributed surplus. The NCIB can be cancelled at the discretion of the Corporation at any time.

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2020 FIRST QUARTER INTERIM REPORT

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NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS Three month periods ended March 31, 2020 and 2019 (unaudited) (Tabular amounts in thousands, except share and per share amounts)

13. Earnings per Share

• (a) Basic Earnings per Share

Basic earnings per share is calculated as net income attributable to common shareholders divided by the weighted average number of Common Shares outstanding for the period. Net income attributable to common shareholders for the three month period ended March 31, 2020, was $4.7 million (2019 – $11.6 million). The weighted average number of Common Shares outstanding for the three month periods ended March 31, 2020 and 2019 was calculated as follows:

Note	Three month periods ended March 31	Three month periods ended March 31
	2020	2019
Issued Common Shares at beginning of period 12 Effect of Common Shares repurchased and cancelled 12	104,824,973 (153,988)	104,824,973 —
Weighted average number of Common Shares at end of period – basic	104,670,985	104,824,973

• (b) Diluted Earnings per Share

Diluted earnings per share is calculated by adjusting net income attributable to common shareholders and the basic weighted average number of Common Shares outstanding by the effects of all potentially dilutive transactions to existing common shareholders. In calculating diluted earnings per share, net income was adjusted as follows:

	Three month periods ended	March 31
	2020	2019
Net income Effect on finance costs from conversion of Debentures(net of tax)	$ 4,662 $ —	11,575 —
Net income – adjusted	$ 4,662 $	11,575

The diluted weighted average number of Common Shares was calculated as follows:

	Three month periods ended	March 31
	2020	2019
Weighted average number of Common Shares – basic Effect of "in the money" stock options Effect of the Debentures	$ 104,670,985 $ — —	104,824,973 — —
Weighted average number of Common Shares at end of period – diluted	$ 104,670,985 $	104,824,973

For the three month period ended March 31, 2020, 3,152,500 stock options (2019 – 3,422,500) were excluded from the diluted weighted average number of Common Shares calculation as their effect would have been anti-dilutive. The average market value of the Corporation's Common Shares for the purposes of calculating the dilutive effect of stock options was based on quoted market prices for the periods ended March 31, 2020 and 2019. For the three month period ended March 31, 2020, the Common Shares that would be issued upon conversion of the convertible unsecured subordinated debentures (" Debentures ") were excluded from the diluted weighted average calculation as their effect would have been anti-dilutive.

14. Seasonality of Operations

Revenue and profitability within the Less-Than-Truckload segment and the Logistics & Warehousing segment are generally lower in the first quarter than during the remainder of the year as freight volumes are typically lower in the first quarter following the holiday season due to less consumer demand and customers reducing shipments. Operating expenses also tend to increase within these segments in the winter months due to decreased fuel efficiency and increased repairs and maintenance expense resulting from cold weather conditions.

A significant portion of the operations within the Specialized & Industrial Services segment is comprised of a wide range of unique businesses providing specialized equipment and services to the oil and natural gas, environmental, construction, pipeline, utility, telecom and civil industries. Earnings are influenced by the seasonal activity pattern of western Canada's oil and natural gas exploration industry whereby activity usually peaks in the winter months and declines during the spring when wet weather and the spring thaw may make the ground unstable. Consequently, municipalities and provincial transportation departments enforce road bans that restrict the movement of heavy equipment, thereby reducing activity levels. Additionally, certain oil and natural gas producing areas are only accessible in the winter months because the ground surrounding the drilling sites in these areas consists of swampy terrain. Seasonal factors and unexpected weather patterns may lead to declines in the activity levels of exploration and production companies and corresponding declines in the demand for the goods and services provided by Mullen Group. As a result, the demand for these services is traditionally highest in the first quarter and lowest in the second quarter.

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2020 FIRST QUARTER INTERIM REPORT

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NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS Three month periods ended March 31, 2020 and 2019 (unaudited) (Tabular amounts in thousands, except share and per share amounts)

15. Revenue

The business of Mullen Group is operated through its Business Units, which are divided into three distinct operating segments for reporting purposes – Less-Than-Truckload, Logistics & Warehousing and Specialized & Industrial Services. The segments are differentiated by the type of service provided, equipment requirements and customer needs. Mullen Group provides the capital and financial expertise, technology and systems support, shared services and strategic planning (the " Corporate Office ") for the Business Units. The Corporate Office also invests in certain public and private corporations. In addition, the Corporate Office, through its subsidiary MT Investments Inc. (" MT "), owns a network of real estate holdings and facilities that are leased primarily to the Business Units. Such properties are leased by MT to the Business Units on commercially reasonable terms. The day to day management of the Business Units is conducted at the subsidiary level. This is the first quarter whereby Mullen Group has commenced reporting financial results in the new segments.  For more information, refer to Note 19.

At March 31, 2020, the Less-Than-Truckload segment consisted of 8 Business Units and is often referred to as the final or last mile delivery of general freight consisting of smaller shipments, packages and parcels. Through an extensive terminal network the pickup, handling and delivery of a wide range of freight including ambient, temperature controlled and consumer goods is coordinated from regional hubs located in Ontario and western Canada. We are committed to investing in the most advanced technologies available ensuring the continued improvement in all aspects of our business, shortening delivery times and providing customers with visibility, via tracking and tracing, to their shipments during transit.

At March 31, 2020, the Logistics & Warehousing segment consisted of 9 Business Units and provides shippers throughout North America with a wide range of trucking and logistics service offerings including full truckload, specialized transportation, warehousing, fulfillment centres that handle e- commerce transactions, and transload facilities designed for intermodal and bulk shipments. Operations and customer service are supported by a robust suite of leading edge technology solutions including a fully integrated transportation management system, customized inventory management and warehouse systems along with our proprietary Moveitonline[®] and Haulistic[TM] technology platforms, applications that are positioning our organization for an evolving and changing supply chain.

At March 31, 2020, the Specialized & Industrial Services segment consisted of 17 Business Units and is comprised of a wide range of unique businesses providing specialized equipment and services to the oil and natural gas, environmental, construction, pipeline, utility, telecom and civil industries. Strategically located throughout western Canada, these specialty Business Units are focused on providing advanced technology solutions and leading edge service capabilities.

Disaggregation of revenue:

The following tables detail Mullen Group's revenue by type of service and timing of the transfer of goods or services by segment and has been restated on a retrospective basis for comparative purposes:

Three month period ended March 31, 2020 Less-than- Truckload	Logistics & Warehousing Specialized & Industrial Services Corporate Intersegment eliminations	Total
$	$ $ $ $	$
Revenue by service line Transportation 105,963 Logistics 7,442 Other(1) 1,086 Eliminations (1,623)	52,414 64,700 — — 21,665 1,897 — — 23,439 45,553 667 — (1,273) (864) — (2,832)	223,077 31,004 70,745 (6,592)
112,868	96,245 111,286 667 (2,832)	318,234
Timing of revenue recognition Over time 106,022 Point in time 8,469 Eliminations (1,623)	53,798 81,825 654 — 43,720 30,325 13 — (1,273) (864) — (2,832)	242,299 82,527 (6,592)
112,868	96,245 111,286 667 (2,832)	318,234

(1) Included within other revenue is $7.9 million of rental revenue comprised of $0.1 million, $1.4 million $5.8 million and $0.6 million recorded in the Less-Than-Truckload segment, the Logistics & Warehousing segment, the Specialized & Industrial Services segment and Corporate, respectively.

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NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS Three month periods ended March 31, 2020 and 2019 (unaudited) (Tabular amounts in thousands, except share and per share amounts)

Three month period ended March 31, 2019 Less-than- Truckload	Three month period ended March 31, 2019 Less-than- Truckload	Logistics & Warehousing Specialized & Industrial Services Corporate Intersegment eliminations	Logistics & Warehousing Specialized & Industrial Services Corporate Intersegment eliminations	Logistics & Warehousing Specialized & Industrial Services Corporate Intersegment eliminations	Total
$		$ $ $ $			$
Revenue by service line Transportation 100,098 Logistics 9,075 Other(1) 1,176 Eliminations (1,281)		58,280 61,933 — — 24,913 1,695 — — 19,333 46,935 650 — (860) (874) — (1,511)			220,311 35,683 68,094 (4,526)
109,068		101,666 109,689 650 (1,511)			319,562
Timing of revenue recognition Over time 100,126 Point in time 10,223 Eliminations (1,281)		59,436 77,100 638 — 43,090 33,463 12 — (860) (874) — (1,511)			237,300 86,788 (4,526)
109,068		101,666 109,689 650 (1,511)			319,562
(1) Included within other revenue is $8.5 million of rental revenue comprised of nil, $1.2 million, $6.7 million and $0.6 million recorded in the Less-Than-Truckload segment, the Logistics & Warehousing segment, the Specialized & Industrial Services segment and Corporate, respectively. 16. Other (Income) Expense Three month periods ended March 31 2020 2019 Change in fair value of investments $ 1,452 $ (121) Loss on sale of property, plant and equipment 17 628 Earnings from equity investments (159) (552) Accretion on asset retirement obligations 6 4 Other (income) expense $ 1,316 $ (41)
			Three month periods ended March 31
			2020	2019
	Change in fair value of investments Loss on sale of property, plant and equipment Earnings from equity investments Accretion on asset retirement obligations		$ 1,452 $ 17 (159) 6	(121) 628 (552) 4
	Other (income) expense		$ 1,316 $	(41)

17. Changes in non-cash working capital

	Three month periods ended	March 31
	2020	2019
Trade and other receivables Inventory Prepaid expenses Accountspayable and accrued liabilities	$ (1,044) $ 1,484 133 1,546	1,302 (3) (3,526) (1,411)
	$ 2,119 $	(3,638)
	Three month periods ended	March 31
	2020	2019
Changes in non-cash working capital items from: Operating activities Financing activities Investingactivities	$ 270 $ 1,137 712	(6,097) 701 1,758
	$ 2,119 $	(3,638)

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NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS Three month periods ended March 31, 2020 and 2019 (unaudited) (Tabular amounts in thousands, except share and per share amounts)

18. Subsidiaries

The tables set forth below provide information relative to Mullen Group's significant subsidiaries and its Business Units, including each entity's name, its jurisdiction of incorporation/formation, the percentage of securities directly or indirectly owned by Mullen Group, a brief description of the entity, and the market areas served, if applicable. The percentages of ownership set forth below include the approximate one percent interest owned by the general partner of each limited partnership.

Significant Subsidiaries:	Significant Subsidiaries:	Significant Subsidiaries:
Company (Jurisdiction of Incorporation / Formation) Percentage owned by Mullen Group (directly / indirectly) Overview Primary Market Area
MT Investments Inc. (Alberta) 100% Wholly-owned subsidiary of Mullen Group Ltd. It was formed on July 1, 2005, when Mullen Transportation Inc. was amalgamated with certain other corporations pursuant to a plan of arrangement under the Business Corporations Act(Alberta) to form a corporation known as MT Investments Inc. N/A
MGL Holding Co. Ltd. (Alberta) 100% Wholly-owned subsidiary of MT Investments Inc., which was incorporated in Alberta on December 22, 2016. It is the limited partner of various Business Units. N/A
Less-Than-Truckload Segment:
Business Unit (Jurisdiction of Incorporation / Formation) Percentage owned by Mullen Group (indirectly) Primary Market Area
Argus Carriers Ltd.(1) (British Columbia) 100% British Columbia and U.S.
Courtesy Freight Systems Ltd. (Ontario) 100% Northwestern Ontario
Gardewine Group Limited Partnership (Manitoba) 100% Manitoba and Ontario
Grimshaw Trucking L.P. (Alberta) 100% Western Canada
Hi-Way 9 Express Ltd.(2) (3) (4) (Alberta) 100% Western Canada
Inter-Urban Delivery Service Ltd.(1) (British Columbia) 100% Lower Mainland British Columbia
Jay's Transportation Group Ltd. (Saskatchewan) 100% Saskatchewan
Number 8 Freight Ltd. (British Columbia) 100% Lower Mainland British Columbia

(1) Acquired July 1, 2019.

(2) On January 1, 2019, the operations of Bernard Transport Ltd. were combined into Hi-Way 9 Express Ltd.

(3) Includes Jen Express Inc., which was acquired on May 1, 2019.

(4) On January 1, 2020, the operations of Load-Way Ltd. and Streamline Logistics Inc., were integrated into Hi-Way 9 Express Ltd.

Logistics & Warehousing Segment:
Business Unit (Jurisdiction of Incorporation / Formation) Percentage owned by Mullen Group (indirectly) Primary Market Area
24/7 The Storehouse (2015) Ltd. (British Columbia) 100% British Columbia
Caneda Transport Ltd. (Alberta) 100% Canada and U.S.
Cascade Carriers L.P. (Alberta) 100% Western Canada
DWS Logistics Inc. (Ontario) 100% Ontario

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NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS Three month periods ended March 31, 2020 and 2019 (unaudited) (Tabular amounts in thousands, except share and per share amounts)

Logistics & Warehousing Segment:
Business Unit (Jurisdiction of Incorporation / Formation) Percentage owned by Mullen Group (indirectly) Primary Market Area
Kleysen Group Ltd. (Alberta) 100% Western Canada
Mullen Trucking Corp. (Alberta) 100% Canada and U.S.
Payne Transportation Ltd. (Alberta) 100% Canada and U.S.
RDK Transportation Co. Inc. (Saskatchewan) 100% Canada and U.S.
Tenold Transportation Ltd. (Alberta) 100% Canada and U.S.
Specialized & Industrial Services Segment:
Business Unit (Jurisdiction of Incorporation / Formation) Percentage owned by Mullen Group (indirectly) Primary Market Area
Canadian Dewatering L.P. (Alberta) 100% Western Canada
Cascade Energy Services L.P. (Alberta) 100% Western Canada
Canadian Hydrovac Ltd. (Alberta) 100% Western Canada
E-Can Oilfield Services L.P. (Alberta) 100% Western Canada
Envolve Energy Services Corp. (Alberta) 100% Western Canada
Formula Powell L.P. (Alberta) 100% Western Canada
Heavy Crude Hauling L.P. (Alberta) 100% Western Canada
Mullen Oilfield Services L.P.(1) (Alberta) 100% Western Canada
OK Drilling Services L.P. (Alberta) 100% Western Canada
Pe Ben Oilfield Services L.P. (Alberta) 100% Western Canada
Premay Equipment L.P. (Alberta) 100% Western Canada
Premay Pipeline Hauling L.P. (Alberta) 100% Western Canada
R. E. Line Trucking (Coleville) Ltd. (Saskatchewan) 100% Western Canada
Recon Utility Search L.P. (Alberta) 100% Western Canada
Smook Contractors Ltd. (Manitoba) 100% Northern Manitoba
Spearing Service L.P. (Alberta) 100% Western Canada
TREO Drilling Services L.P. (Alberta) 100% Western Canada

(1) On January 1, 2020, the operations of Withers L.P. were combined into Mullen Oilfield Services L.P.

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NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS Three month periods ended March 31, 2020 and 2019 (unaudited) (Tabular amounts in thousands, except share and per share amounts)

19. Operating Segments

This is the first quarter whereby Mullen Group has commenced reporting financial results in three new segments: Less-Than-Truckload; Logistics & Warehousing; and Specialized & Industrial Services. The change in segment reporting structure more accurately reflects the business of the Corporation today and is aligned with how financial information is regularly reviewed internally for the purposes of decision making, capital allocation and accessing performance.

Mullen Group has three operating segments. These three operating segments have been differentiated by the sector of the economy in which the businesses operate, the type of services provided, the equipment requirements and the customer needs. The Less-Than-Truckload segment provides final or last mile delivery of general freight consisting of smaller shipments, packages and parcels. Through an extensive terminal network the pickup, handling and delivery of a wide range of freight including ambient, temperature controlled and consumer goods is coordinated from regional hubs located in Ontario and western Canada. The Logistics & Warehousing segment provides shippers throughout North America with a wide range of trucking and logistics service offerings including full truckload, specialized transportation, warehousing, fulfillment centres that handle e-commerce transactions, and transload facilities designed for intermodal and bulk shipments. The Specialized & Industrial Services segment provides specialized equipment and services to the oil and natural gas, environmental, construction, pipeline, utility, telecom and civil industries.  For more information, refer to Notes 15 and 18 .

The following tables provide financial information that conforms to the Corporation’s new segment presentation on a retrospective basis for comparative purposes:

	Less-than- Truckload	Logistics & Warehousing Specialized & Industrial Services Corporate	Intersegment eliminations	Intersegment eliminations
			Less-than- Truckload Logistics & Warehousing Specialized & Industrial Services
Revenue Income (loss) before income taxes Depreciation of property, plant and equipment Amortization of intangible assets Capital expenditures(1) Total assets at March 31, 2020	$	$ $ $	$ $ $	$
	112,868 2,344 3,467 2,641 6,921 361,549	96,245 111,286 667 9,051 2,844 (5,752) 2,745 9,843 1,481 1,524 865 — 2,371 5,099 1,629 256,614 471,522 678,247	(152) (2,369) (311) — — — — — — — — — — (34) (60) — — —	318,234 8,487 17,536 5,030 15,926 1,767,932

(1) Excludes business acquisitions

	Less-than- Truckload	Logistics & Warehousing Specialized & Industrial Services Corporate	Intersegment eliminations	Intersegment eliminations
			Less-than- Truckload Logistics & Warehousing Specialized & Industrial Services
Revenue Income before income taxes Depreciation of property, plant and equipment Amortization of intangible assets Capital expenditures(1) Total assets at December 31, 2019	$	$ $ $	$ $ $	$
	109,068 6,254 2,923 1,877 4,227 355,764	101,666 109,689 650 7,074 775 1,531 2,710 10,226 1,516 1,523 1,026 — 4,512 7,715 1,575 263,161 475,028 655,339	(93) (931) (487) — — — — — — — — — — (86) (2,075) — — —	319,562 15,634 17,375 4,426 15,868 1,749,292

(1) Excludes business acquisitions

Performance is measured based on segment income before income tax, as included in the internal management reports that are reviewed by Mullen Group's CEO and President. Segment income is used to measure performance as management believes that such information is the most relevant in evaluating the results of segments relative to other entities that operate within these industries.

20. Subsequent event

Subsequent to March 31, 2020, until the date of this report, the Corporation repurchased 934,192 Common Shares at a total cost of $4.3 million.

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